Boeing Wins $300 Million Contract for P-8 Parts

15 Aug 2014

Boeing Co. has landed a nearly $300 million contract with the U.S. Navy for parts needed to build another dozen P-8 maritime surveillance aircraft.

The deal was announced by the Pentagon on Thursday and includes funding for so-called long-lead items to build and deliver 12 of the planes, including eight for the Navy and four for the government of Australia, according to the announcement.

The award comes as the Chicago-based aerospace giant is cutting costs from its defense segment in anticipation of a downturn in U.S. military spending. Defense accounted for $33 billion -- more than a third -- of the company's overall 2013 revenue of almost $87 billion, according to its annual report.

Boeing has already trimmed $4 billion from the defense unit and expects to make another $2 billion in cuts, with most of the reductions coming from its supply chain, said Chris Chadwick, the head of Boeing Defense, Space and Security, according to the website www.seekingalpha.com.

Automatic federal budget cuts known as sequestration may slice the U.S. defense budget by almost 25 percent, the website reported.

Meanwhile, Boeing is making more and more political donations at the state and local level, in a shift that one analyst said may be an attempt to secure tax breaks and other benefits at a time of challenges for the defense industry at the federal level, according to reporting by Politico's Jeremy Herb.

Boeing is also looking for business opportunities in the global defense market to offset decreased U.S. military spending. The company is pressing for international sales of the P-8 Poseidon, a military version of the 737 airliner that recently completed its first deployment overseas but still has years before reaching its full operating potential, and of a smaller maritime surveillance plane.

In addition to selling the Navy more than 100 P-8s, Boeing plans to deliver as many as a dozen Poseidons to the governments of India and Australia. The United Kingdom is also rumored to be interested in buying the plane, though officials at the Farnborough International Air Show outside London last month wouldn't say whether an agreement was in the works.

Boeing has transferred 14 P-8s to the Navy. The first Poseidon squadron recently completed a seven-month deployment to Kadena, Japan. The crews performed low-altitude search-and-rescue missions, including helping to search for the missing Malaysian airliner.

The aircraft currently uses similar radar, surveillance systems and other equipment as the plane it's slated to replace, the P-3 Orion made by Lockheed Martin Corp., but that will change in coming years as it receives more advanced technology.

Boeing has also partnered with Bombardier to build a smaller maritime patrol aircraft, using the Challenger 605 mid-size business jet and many of the systems from the P-8 without the weapons and anti-submarine warfare technology.